Dr. Colin Hunt:

It might be useful to highlight the context in which these rate increases are being introduced by the ECB. It is to counter a significant increase in reported price inflation across much of the world. The rate increases are designed to encourage saving and discourage borrowing as a means of reducing inflation pressures. Banks are an essential part of the monetary policy transmission system.

In respect of what is currently happening in terms of rate increases, at the start of this year no one could have envisaged the number of rate increases that seem likely over the year. As was said, there was a rate move of 50 basis points, 0.5%. We responded to that by not increasing rates where we have discretion in terms of borrowing and by eliminating negative interest rates on the deposit side. In terms of the shape of our mortgage book, which accounts for more than half of the lending book of AIB Group, approximately 52% of that is fixed. An increase in variable rates at any point in time will not impact on those borrowers. Approximately less than 20% are tracker rates and the residual, nearly 30%, are on standard variable rates. Substantial work done has been done in recent years to increase the range of products available to customers to give them real choice in what product they want to use when borrowing for a mortgage. The vast majority of customers coming into us now are choosing fixed rates.

A 75-basis point, 0.75%, increase in rates was announced on Thursday last week and it seems there will be further rate increases. The President of the European Commission has indicated that there will be at least two increases, but less than five, and, therefore, interest rates will be significantly higher, in all likelihood going forward, than they were at the start of this year. Further rate increases are expected in October and December.